27 Jul Heads Up! Get More Money from Your 2016 Tax Return
You can take advantage of common tax deductions to get more bang for your buck. It is a matter of making the right choices on your return. The following deductions will leave more money in your pocket.
Change Filing Status
When completing your tax return, the filing status has a huge impact on your refund.
- Married Couples
Most married couples choose to file jointly, but there is a chance that you can boost your return if you file separately. Filing a joint return is not always beneficial in some instances. Try doing the calculations for a joint return as well as filing separately to see which one shows the highest refund.
The IRS uses the Adjusted Gross Income (AGI) to determine the deductions for medical expenses. When you file separately, the AGI would be lower than when you file jointly. If one spouse has medical expenses resulting from COBRA due to job loss, the husband or wife might reach the required percentage of AGI. Therefore, filing a separate return might increase refund status.
On the other hand, you would be better off filing jointly if either spouse incurs expenses for travel, work search if unemployed, long distance phone calls, or for career counseling and networking. You can also lose certain credits offered to joint filers if you file separate returns.
According to a 2016 study, most of the people in Australia have never overestimated their expenses in hopes of getting more money when filing their tax returns.
When you are single, you can maximize your refund if you file as Head of Household. It would work best if one or more child were living with you for six months or more during the tax period. Additionally, a requirement would be that you pay 50 percent or more for upkeeping a residence. The expenses include mortgage, rent, utilities, homeowners insurance, food, and repairs.
Moreover, if you care for a parent, you can file as Head of Household. To qualify, you would have had to have paid more than 50 percent of the household expenses for an entire year. Even if the parent lives in a senior home and you pay the costs, you would still qualify for that filing status.
If you have an IRA, you can deduct up to $5,500, and if your age is 50 or older, you can deduct $6,500. The IRS gives you until April 15 to set up an IRA for the previous year. A tip would be to file the return early to get a refund and use it to open up the IRA. There is also an additional credit of $2,000 if you are married and filing jointly.
Best Deduction Idea
It is advisable to take the itemized deduction if you have numerous expenses. For singles, the standard deduction is $6,300, and for couples filing joint returns, it is $12,600. To take advantage of the itemized deductions, put all your receipts in one place and add them up. If you add charitable donations to the list, that will increase your expenses even more. More costs that you can include are casualty losses, unreimbursed business expenses, job search expense, and state and local tax deduction.
Claim for Supporting Someone
You can make claims for supporting a friend or a family member. If you have been supporting anyone for an entire year, you can get a dependent exemption of $4,000. The IRS has rules for non-relatives, but the expenses are legitimate if he or she has lived with you the entire year. The other requirement is that the relative or friend has to have earned $4,000 or less for the year and has not contributed more than half of the expenses.
You can increase your refund by just making the right choices when filing your taxes. For example, changing your filing status can maximize how much money you get back. Take advantage of IRA deductions. The deadline is April 15 to open one for the previous year. It is more advantageous to take the itemized deduction. It will increase your refund. You can also deduct $4,000 for supporting a family member or a friend for an entire year.